The Australian - 2.12.2011

GROWING community and political opposition to coal-seam gas production is beginning to make analysts doubt whether yet-to-be approved projects will get up.

In a note to clients yesterday, Credit Suisse analyst Sandra McCullagh said that while $50 billion of CSG export projects being built by Santos, BG Group and Origin at Gladstone were likely to overcome some landowner issues, this week’s Senate committee recommendation that CSG development in some areas be suspended was a worry for others. Ms McCullagh said the 50-50 Arrow Energy joint-venture between Shell and PetroChina, whose $535 million bid for Bow Energy was cleared by the competition watchdog yesterday, could face hurdles.

“It is hard to see they will have any easy path to approval as their Surat CSG acreage (in Queensland) is all strategic cropping land,” she said. “Focus will have to be on the less-sensitive Bowen Basin so the concern is that Arrow will not have enough gas to feed a two-train LNG project.”

AGL Energy’s NSW designs would be a tough ask and as such are not included in Credit Suisse’s valuation, the note said.

East coast gas users face big price rises when the export plants begin operations because local buyers will be competing with Asian buyers for gas that has previously been cheap by international standards.
The ACCC Chairman said it was to be expected prices would rise in a market opened up to exports. “There’s nothing we (the ACCC) can or should do about that,” he said.